State Auditor John Keel painted an unflattering portrait of an agency that often failed to follow its own rules or state law and encouraged at least the perception of conflicts of interest, including some former agency leaders having business or professional relationships with grant recipients.

The Cancer Prevention and Research Institute of Texas, commonly called CPRIT, also failed to document many of its actions and did not always follow a constitutional requirement that grant applicants have matching funds before they received a state grant, the audit says.

The agency has so far disbursed about a fourth of the $3 billion that voters approved in 2007 for a 10-year effort to find cures for various types of cancer.

"By not ensuring that all grant applications are properly evaluated and documented, CPRIT weakens its ability to ensure that its award decisions best align with the agency’s mission," Keel concluded.

Prosecutors and lawmakers targeted CPRIT after reports that the agency gave a Dallas startup, Peloton Therapeutics, an $11 million grant without the required scientific review.

On Monday Keel’s audit uncovered problems with CPRIT’s largest award, a $25.2 million grant to the Statewide Clinical Trials Network of Texas, or CTNeT.

To begin with, CPRIT awarded the grant in June 2010 to a third party, MD Anderson Cancer Center, two months before CTNeT existed. The audit says it remains "unclear" how CPRIT later transferred the grant to the new non-profit company that includes a network of existing public and private cancer centers for clinical trials.

CPRIT awarded $25.2 million, $5 million more than the application, although the audit says CTNeT’s application did not receive a favorable peer review score.

CPRIT’s leadership was deeply involved in the new clinical network. CPRIT Chairman Jimmy Mansour, Vice Chairman Joseph Bailes and then-Executive Director Gimson hired Patricia Winger as CTNeT’s chief operating officer before the grant contract between the two entities was executed, according to the audit.

Also, Gimson and Gilman served on CTNeT’s board.

"While they were appointed to the CTNeT board after CPRIT awarded the grant to CTNeT, their membership on the CTNET boards gives the appearance that the grant recommendation for CTNeT may have been improper," the audit says.

CPRIT violated its own rules by advancing CTNeT $6.8 million, although it was only to reimburse the network for expenses incurred, according to the audit. CPRIT continued advancing money after it determined that CTNeT spent as much as $301,000 on questionable items.

Those questionable items, according to the audit, included three bonuses for the chief operating officer, Winger, totaling $100,000; a merit pay increase for Winger totaling $60,000; and moving costs of $16,288. Other costs questioned included money spent on interior decoration, furniture, salary increases, a signing bonus and fuel for rental cars totalling $116,872.

A spokeswoman for CTNeT did not respond to requests for comment.

In the audit, CPRIT did not defend its actions with CTNeT.

"CPRIT believes that the statewide clinical trails concept has significant innovative cancer treatment value," the agency responded. "However, poor management decisions on the part of CTNeT, combined with inappropriate involvement from CPRIT staff that should not have occurred in CTNeT decision-making, has led to an unfortunate situation where restructuring of CTNeT management, business plan and contractual agreement with CPRIT may need to occur and are being evaluated."

The 99-page audit uncovered other issues:

—Top CPRIT executives Gimson and Gilman, as well as two members of an agency review committee, had business and professional relationships with grant applicants and grantees.

—Gimson discussed his grant recommendations with Mansour and Bailes, the agency’s chairman and vice-chairman, before making his recommendations to the 11-member board. "This creates a situation in which some members of the oversight committee may have influenced the executive director’s grant recommendations," the audit says.

—While CPRIT required out-of-state reviewers to recommend research and prevention grants to lessen the potential for conflicts, some of the peer reviewers of commercialization projects lived in Texas.

—A CPRIT contract with an outside firm increased from $15.7 million to $21.2 million within the first three years of a five-year contact. A second contract increased from $1.5 million to $4 million halfway through the four-year term. The audit says it "suggests that CPRIT did not understand the scope of work it needed."

—Although grant applicants were supposed to have matching funds, some recipients did not have the funds or they counted other money that would not be available to complete the goal of their CPRIT grant.

Wayne Roberts, CPRIT’s interim director, did not dispute the audit.

"The report paints an accurate picture of an agency in the early stages of its development," he wrote. "Some of the missteps identified in the report are common in new agencies when executives and volunteer board members are new to state administrative practices and do not have established agency policies upon which to rely."

Roberts said he believes the agency can be fixed: "Although serious, the missteps appear to have only affected a few of CPRIT’s awards."

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